Last week was relatively quiet in U.S. economic news, but the news we did get was generally encouraging. Once again, the top stories came from abroad, as China’s market stabilized and Greece moved closer to exiting the eurozone before reaching a deal over the weekend.
U.S. Economic News
The housing market. On Wednesday, the Mortgage Bankers Association reported that mortgage applications were up by 4.6 percent. This is a weekly statistic that bounces around a lot, and the apparently strong gain simply reversed a prior drop of 4.7 percent. Nevertheless, it was a good sign.
Labor and consumer data. Job openings ticked up last week, with the Job Openings and Labor Turnover Survey (JOLTS) showing 5,363,000 openings around the country, beating the expected result of 5,300,000. This is the highest level of job openings ever, indicating the strongest labor demand since at least December 2000. The number of unemployed per position was 1.6, the lowest since December 2007. Other JOLTS statistics were similarly positive.
In contrast, initial jobless claims increased to 297,000 from the prior 282,000—a substantial uptick and well above expectations. This is a volatile statistic, however, and should be taken with a grain of salt; the week was shortened by the July Fourth holiday, and these numbers are hard to adjust properly. In addition, the auto industry typically lays off employees around this time to retool plants, which tends to distort this stat. The increase is something to keep an eye on but not worry about, particularly since the data continues the longest run of sub-300,000 claims figures since 2000.
Meanwhile, the Bloomberg Consumer Comfort Index ticked down slightly, to 43.5 from 44, which looks like a normal variance.
Business surveys. The Institute for Supply Management’s Non-Manufacturing Survey posted a slight increase, from 55.7 to 56.0. This is a diffusion index, with any number above 50 indicating expansion. Coming in slightly below expectations of 56.4, the reading still indicates healthy levels of business confidence and demand in the service sector, and it has historically signaled growth of around 3 percent. One weak point was a decline in employment expectations. Although this is a cautionary sign, it’s also a volatile data point—worth watching but not an immediate concern.
The big story over the weekend, again, was Greece. As of Monday morning, a deal had apparently been reached, removing some of the immediate uncertainty. Many pieces remain to be resolved, however, and the deal as reported is only an intermediate solution.
Be that as it may, the announcement should have positive effects on markets this week.
With the world's eyes on Greece, China’s government finally managed to stop the slide in its stock market. It did so largely by halting trading, removing more than half of securities from the market and placing prohibitions on selling for many market actors, among other radical steps.
For the moment, at least, uncertainty seems to have diminished, and prices are rebounding. Although the situation is still worrisome, it will probably stay out of the headlines for the next week or so at least.
The Federal Reserve
After high expectations, there was little actual news in the Federal Reserve’s June meeting minutes. Despite a sense that a September rate increase is quite probable, the intervening events—Greece and China, in particular—reduced the impact of the minutes.
The Week Ahead
A number of economic data points are slated for release in the coming week:
- On Tuesday, the retail sales report is expected to show a healthy increase. Although sales growth will be down substantially from the previous month’s blowout figure, we should continue to see strong growth.
- Wednesday will bring the industrial production report, which should reverse the previous month’s small decline on higher production of oil and gas.
- On Thursday and Friday, we’ll see reports on housing industry confidence, which should remain at multiple-month highs, and housing starts, which are expected to increase substantially.
- Finally, Friday will bring reports on consumer prices and consumer confidence. Prices should increase as the risk of deflation continues to recede. Consumer confidence may well tick down, in response to higher gas prices and weak stock market performance.
The other major event here in the U.S. will be Janet Yellen’s congressional testimony. Given the recent turbulence in the world economy and markets, her comments should offer meaningful insight into the Fed’s expectations.
And we'll certainly continue to watch what happens in Greece and Europe, as well as in China. Fortunately, the U.S. economy remains solid, and we seem to have avoided substantial damage so far from dramatic events abroad.